Aquila buys timberland for institutional investors

The German asset manager has acquired timberland assets in the UK for the first time.

Aquila Capital, Aquila Group’s alternative asset management arm, has bought 3,100 hectares of forest in Scotland for unnamed institutional investors.

This is the firm’s first foray into the British timber market, which Aquila said offered the prospect of immediate returns, as well as local demand for timber and good transport links. The firm did not provide any financial details for the transaction.

The newly acquired timberlands are split across three locations and populated with fast-growing coniferous species such as the American lodgepole pine, much of it mature and ready for harvesting. The trees will be processed into structural lumber, panel boards, pallets, fencing material and bio energy.

The move marks the expansion of institutional investment in forestry beyond the Netherlands and Scandinavian countries, which are the traditionally targets in Europe.

“The UK market is not new for timber and in general we absolutely consider the market as having potential for expansion,” Aquila timber fund manager Nils von Schmidt told Agri Investor, adding that the investable forest areas, investment volumes and consequently deal sizes in Britain are inevitably lower than in the US.

“Contrary to the US in the early 1990s, there is no timely coincidence of a vertically integrated forest industry willing to divest its forest holdings together with demand from institutional investors for this type of asset,” he said.

“From a legal and tax perspective as well as the […] political framework, the UK and Ireland are attractive investment markets and will remain interesting in the near future.”

UK wood production and consumption remains below pre-recession levels the UK, but is expected to continue growing in the near future. In recent years, the UK timber industry has also faced increased competition from imported European timber due to currency exchange rates, according to a UPL Tilhill timber bulletin.

Aquila Capital manages timberland assets of over ‎€83 million, and has other timberland investments in Europe including Finland. It also owns timberlands in the US and Latin America.